The property market in Lagos is seeing increased global interest as our fundamentals continue to lure investors in. The rebasing of our GDP has further displayed the strong underlying potential that lays relatively under-utilised.
The most recent development involves the exclusive Candy Global Prime Sector (GPS) report produced by Candy and Candy, revered as one of the world’s leading interior design houses, in conjunction with Savills Research and Duetsche Bank Asset & Wealth Management. The report identifies Lagos as a New Frontier, a Rising Star amongst 11 others cities that currently do not have world city status but which are seen as rising 2nd tier cities. These cities have the potential to show strong residential growth as global investors seek alternative locations for their investments. Others include our African economic counterpart – South Africa, as well as Chicago, Miami and Tel Aviv in Israel where property prices are through the roof.
Most of the new interest in Nigeria and its commercial capital is arguably an implication of our new title as Africa’s newest highflier. This not a bad thing. Nigeria’s fundamentals are strong and the long rung upside potential is reasonably large considering the generally underdeveloped nature of the whole country. The recent GDP rebasing proved that despite the relatively minimal effort from the government to develop the sector, it still played a strong role in the Nigerian economy, contributing 7.6% to GDP. Low penetration in the mortgage sector, which the NMRC aims to rectify, also indicates that there is more room for growth.
Interest of this nature will continue to grow in Nigeria and it is expected that this will have a direct impact on local property markets, which are an inherent part of any nation’s wealth. That’s if we can manage to sort out or problems, which more often than not pushes investors away.
Nonetheless why Lagos, and why are international property investors seeking alternative locations for real estate investment? Global property hotspots and safe havens like New York, Germany and London appear fully valued and investors with already full trophy asset portfolios are looking with more interest at the yields available from real estate. The ideal place to find those yields is in locations where capital values have not been driven up by Ultra High Net Worth Individual (UHNWI) inward investment. Lagos is one of them! According to the research prime residences are particularly scarce and this meant that Lagos had the highest price multiple over secondary stock in any of the cities mentioned. Other factors considered include English as a 1st or 2nd language, a young well educated population as well as the presence of water bodies, lakes, and shoreline all of which Nigeria tick the box for.
In the long run this could mean that Lagos may become a go-to African hotpot for luxurious property. The property prices in residential markets are already amongst the most expensive in Sub-Saharan Africa, but this is as a result of low supply. Notwithstanding, whenever property investors or UHNWIs are seeking African destinations for their African investments or holiday homes, Cape Town always gets the pick. It’s gorgeous scenery and up to standard infrastructure consistently ensures it. However, now that internationals are recognising that Lagos has the capacity to become a similar African destination, foreign direct investment in the real estate market here is anticipated to grow, as these investors seek long run capital appreciation.
Besides, global investors aren’t the only ones keen on property. It was recently revealed that real estate was the largest asset class for Nigerian High Net Worth Individuals (HNWIs). A report, which evaluated asset allocation trends of Nigerian HNWIs, showed that a total of 25% of their assets were held in real estate in 2013. With equities and cash following at 18% and 16% respectively.
As interest in Lagos begins to rally, it is important that prospective and current investors properly position themselves to prepare for the long run capital appreciation that these international investors are anticipating.
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